West Law Report

Manufacturer entitled to selling price as damages for lost goods

Posted in Times Law Report by mrkooenglish on September 10, 2008

From The TimesSeptember 10, 2008

Manufacturer entitled to selling price as damages for lost goods
Court of Appeal
Published September 10, 2008
Sony Computer Entertainment UK Ltd and Another v Cinram Logistics UK Ltd
Before Lord Justice Rix, Lord Justice Wilson and Lord Justice Rimer
Judgment August 8, 2008

A manufacturer and seller of goods who lost them through the fault of another before he could make delivery and earn the price could recover that price as damages for their loss.

The Court of Appeal so stated in a reserved judgment when dismissing the appeal of Cinram Logistics UK Ltd Europe Ltd against a decision by Judge Knight, QC, sitting as a deputy judge in the Commercial Court ([2008] EWHC 14 (QB)) allowing the claim of Sony Computer Entertainment UK Ltd and Sony Computer Entertainment Europe Ltd in contract, bailment and negligence against Cinram.

An order of memory cards for computer games sent by Sony to Cinram’s warehouse for onward delivery to the purchaser was stolen and diverted into the possession of fraudsters. Cinram admitted liability for the losses and the trial assessed damages.

The judge found that on the balance of probabilities Sony had proved its claimed loss by showing that the sales in question had not been replaced and recovered the price at which the goods were sold to the purchaser, namely, the wholesale value of the lost goods.

Mr Timothy Marland for Sony; Mr Alexander Hill-Smith for Cinram.

LORD JUSTICE RIX said that the issue was: if a manufacturer and seller of goods lost them through the fault of another before he could make delivery and earn the price, could he recover that price as damages for their loss, or was he limited to the lower manufacturing cost of replacing those goods, at any rate, unless he proved that he could not make good the lost sale to his buyer?

In his Lordship’s judgment, whether the matter was looked at by analogy with the case of the seller who sued his buyer for nonacceptance, or whether the matter was looked at more directly, asking what an owner of goods had lost by reason of having his goods lost or converted by a bailee, in breach of contract, there being, as in the present case, no problem on the ground of remoteness or lack of knowledge of the profit in question, the answer must be that prima facie the owner was entitled to the value of his goods.

If the defendant wished to say that the loss was less because the profit could have been earned in any event by a substitute or replacement sale, at the cost only of the expenditure of a lesser sum for the purpose of manufacturing or buying in further goods, then the defendant bore the burden of proving that case.

It was not for the claimant to prove a negative, that he had not recouped the profit by a substitute sale, but for the defendant to prove a positive, that the profit had been recouped and thus the loss of profit had not been suffered at all.

Lord Justice Wilson and Lord Justice Rimer agreed.

Solicitors: Waltons & Morse LLP; Brookstreet Des Roches LLP, Abingdon.

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